McIntosh v Shashoua Petitioner [1931] HCA 56

McIntosh v Shashoua Petitioner [1931] HCA 56 - HCA 1931 case summary — Zoe

[19]

was indebted to the petitioner (1) in the sum of £1,558 0s. 9d., being the amount of contribution payable to her by McIntosh in respect of two guarantees - one in the sum of £5,000 and interest and the other in the sum of £2,000 and interest - given by the petitioner and McIntosh respectively to the National Bank of Australasia Ltd. to secure the overdraft of Harry Rickards' Tivoli Theatres Ltd. with that bank, under which she had been called upon to pay and had paid on or before 24th February 1931 the sum of £5,453 2s. 8d. - McIntosh's proper proportion whereof was £1,558 Os. 9d., which he had failed to pay to her either wholly or in part ; (2) in the sum of £99 2s. 2d., being the amount payable to her as assignee from the Permanent Trustee Co. of New South Wales Ltd. of a judgment obtained against McIntosh by that company on 10th February 1931; and that within six months of the presentation of the petition McIntosh had committed an act of bankruptcy in that execution levied in respect of the judgment referred to above was on 27th February 1931 returned unsatisfied. The petition was served upon MeIntosh in Melbourne on 6th March 1931, and on 12th March he caused notice to be given of his intention to oppose the making of a sequestration order on the grounds (1) that he disputed the debt of £1,558 0s. 9d. referred to in the petition: (2) that he was not indebted to the petitioner either for the whole or any part of such sum as (a) one Edmund Covell was a joint guarantor with him in respect of the £2,000 referred to above ; (b) there was still a sum of money owing to the National Bank of Australasia Ltd. in respect of the overdraft referred to above; and (c) the rights of the parties had not been determined and worked out by proper proceedings between the petitioner, himself, Covell and Harry Rickards' Tivoli Theatres Ltd. : (3) that the petition did not disclose any grounds for holding him liable to the petitioner in respect of the said overdraft : (4) that with regard to the debt of £99 2s. 2d. the Court should not, in the exercise of its discretion, make a sequestration order based upon such debt because the petitioner purchased the debt assigned to her with the sole object of founding the petition in bankruptey and for improper motives, and since the presentation of the petition he had tendered payment of the amount due under the judgment, which amount had been refused, and he was now willing to pay the

[20]

debt the Permanent Trustee Co. of New South Wales Ltd. should e been joined as a party to the petition. _ With regard to the debt of £1,558 0s. 9d., it appeared that the ment of the overdraft of Harry Rickards' Tivoli Theatres Ltd. the National Bank of Australasia Ltd. was the subject of two ntees, namely, a joint and several guarantee by McIntosh Edmund Covell, which was produced to the Court, to the extent f £2,000, and a guarantee by Miss Joan Norton (as Mrs. Shashoua en was) to the extent of £5,000. At the time of the hearing the document evidencing the latter guarantee was in London and, e, was not produced to the Court. Counsel for the debtor ected to any reference to the document unless it were produced its execution by the parties thereto proved. Other evidence ed for the purpose of proving the existence and nature of the ntee was (1) an affidavit by the bank's accountant to the that the overdraft in question was secured by the two ; tees referred to above, that of Mrs. Shashoua being the later ntime ; that Mrs. Shashoua having been called upon to pay she had d to the bank under her guarantee the sum of £5,453 2s. 2d., no payments had been received by the bank from McIntosh or vell under the guarantee given by them; (2) admissions alleged have been made by the debtor in ground 2 of his notice of pposition, which is set out above ; (3) a statement of defence signed MeIntosh as a director and filed on behalf of Harry Rickards' i Theatres Ltd. in equity proceedings brought against that company by Mrs. Shashoua, which set out that in pursuance 'an agreement between Mrs. Shashoua and the company the er gave to the National Bank of Australasia Ltd. a guarantee for the repayment of the overdraft of the company with the bank the amount of £5,000 - (the statement of defence was not sworn) ; (4) a conversation between a witness and MeIntosh in the rse of which the latter was alleged to have admitted that he present when Mrs. Shashoua (then Miss Joan Norton) executed he document evidencing the guarantee in question. evidence in respect of the debt of £99 2s. 2d. showed that this represented debt and interest under a judgment of the Supreme

[23]

Suietoua: on 26th February for execution, was returned two days later wholly ~~ unsatisfied. By a document executed in New South Wales on 2nd March the Permanent Trustee Co. assigned the judgment debt to Mrs. Shashoua, the whole amount thereof having been received by the company from her attorney duly authorized in that behalf, a written notice of which assignment was, between the hours of 12 o'clock noon and 1 o'clock p.m. of that day, left, in an envelope addressed to him, at McIntosh's last known place of residence situate in Robertson Road, Centennial Park, Sydney, the bankruptcy petition being signed between the hours of 1.30 o'clock p.m. and 2 o'clock p.m. and filed between the hours of 3 o'clock p.m. and 4 o'clock p.m. the same day. On 12th March the amount due under the judg- ment was, on behalf of McIntosh, tendered to Mrs. Shashoua's attorney, her solicitor, but such tender was refused - the reason given for the refusal being the acts of bankruptcy alleged to have been committed by McIntosh, and other debts owing by him which had been brought under the notice of the petitioning creditor. In the course of cross-examination the attorney under power of Mrs. Shashoua stated that the judgment debt was purchased in order that bankruptcy proceedings might be taken and "to have a second string to my bow." He denied that it was sought to make McIntosh a bankrupt so that at the subsequent examinations information might be obtained from him for use in an action for damages brought by McIntosh against Truth and Sportsman Ltd., the whole of the ordinary shares of which company were owned by the Norton Estate, in which Mrs. Shashoua had an interest, and of the trustees of which he, the attorney, was the chairman. The attorney further stated that when he sent the notice of the assignment of the judg- ment debt to McIntosh's house, he did not know that the latter was not there ; but he learned subsequently that McIntosh had proceeded to Melbourne. The point was not taken at the hearing that the Permanent Trustee Co. of New South Wales Ltd. should have been joined as a co-petitioner, nor was the complete assignment of the

[58]

other hand, it was said to be immaterial whether the assignment was legal or equitable, because the equitable assignee of a legal debt may present a petition in bankruptcy against the debtor although the assignor is not joined in the petition. For this position Ex parte Cooper; In re Baillie (1), was relied upon - a decision which is supported by Jn re Montgomery Moore Ship Collision Doors Syndicate Lid. (2) and In re Steel Wing Co. (3). These questions were not raised upon the hearing of the petition before the Court of Bankruptey, although one of the grounds taken in the notice of opposition was that the judgment creditor should have been joined as a party to the petition. In that Court it would have been open to the petition- ing creditor to apply for an amendment of the petition by joining the assignor, the judgment creditor, and, if this course had been adopted, the questions would not have remained open for decision. It is not in accordance with the practice of this Court to permit to be raised for the first time upon appeal an objection which is procedural in character, and remediable in the Court below. It is, therefore unnecessary to express any opinion upon the sufficiency of the notice given to the debtor to complete a legal assignment, or upon the*competence of the equitable assignee of a legal debt to petition without joining the assignor. It was urged, however, that a sequestration order ought not to have been made with this debt as its foundation, because the Court of Bankruptcy should have been satisfied that for a sufficient cause no order ought to be made (sec. 56 (3) (b) of the Bankruptcy Act 1924-1930). The petition was presented by the attorney under power of the petitioning creditor, and the cause relied upon consisted in the motives by which he was actuated in purchasing the debt and presenting the petition. These motives were investigated in the Court below, but it was not shown that the attempt to obtain a sequestration order had any collateral purpose. It was, of course, admitted that the debt was purchased for the very purpose of presenting the petition. But the evidence is consistent with the view that the object of seeking a sequestration order was to have the debtor's assets applied towards satisfying the claims of the petitioning creditor as well as of other creditors,

[65]

in equity. Under the English law before the Bankruptey Act 1869, this was undoubtedly the rule (Watson v. Humphrey (1); Ex parte Blencowe; In re Blencowe (2)). Where the debt, however, was vested in a mere trustee for an absolute beneficial owner, the trustee could not - with some exceptions - alone sustain a petition for adjudication, and the beneficial owner must have joined (Ex parte Culley; In re Adams (3); Ex parte Dearle; In re Hastings (4) ). The English Bankruptcy Act 1869 provided that the debt of the petitioning creditor "' must be a liquidated sum due at law or in equity," and although these words do not appear in the English Acts of 1883 and 1914, the better opinion is that the word " debt" in those Acts includes an equitable debt (Williams' Bankruptey Practice, 13th ed., pp. 47-48; Wace on Bankruptcy, p. 55; In re Steel Wing Co. (5) ). Cotton L.J., however, said in Ex parte Culley ; In re Adams (6) : - " The words are, 'must be a liquidated sum due at law or in equity.' I do not think that means to deal with the question whether there is a title in equity as distinguished from the title at law, but it means simply that a debt in equity, an equitable debt, or a debt at law, a legal debt, will be either of them sufficient to support a petition, and it in no way deals with the person who must come before the Court representing the debt." However, in Ex parte Cooper ; In re Baillie (7), Bacon C.J. held that the equitable assignee of a legal debt could present a bankruptey petition against the debtor without joining the assignor as a co-petitioner. And that decision has been applied in the analogous case of a petition for the winding up of a company by a creditor (In re Montgomery Moore Ship Collision Doors Syndicate Lid. (8); In re Steel Wing Co. (9); Buckley, Companies Acts, 11th ed., pp. 363-367). In Re Paravicin (10) Judge Lukin expressed the opinion that both legal and equitable debts were debts within the meaning of sec. 55. The history of the bankruptcy law in Australia supports this view, for in all the States except Western Australia, debts, whether due at law or in equity, were sufficient to ground a petition against a debtor. In Western

[74]

of a judgment obtained against the respondent in the reme Court of New South Wales by the Permanent Trustee Co. New South Wales Ltd. and such execution was "returned tisfied." It was not questioned that such act of bankruptcy d been committed, although a perusal of the writ of fi. fa. and e return thereto gives rise to considerable doubt upon the matter. e only grounds of appeal debated before this Court were (1) ether the respondent was entitled to present the petition; (2) rhether the Court of Bankruptcy should have dismissed the petition "other sufficient cause" within the meaning of sec. 56 (3) (6) the Bankruptey Act 1924-1930. In order to qualify as a petitioning creditor, the respondent first relied upon an alleged debt of £1,558 0s. 9d., being the amount of contribution supposed to be payable to her by the debtor because he was a co-surety with her in respect of two guarantees to secure indebtedness of a company known as Harry Rickards' Tivoli es Ltd. to the National Bank of Australasia Ltd. - one, ed to £5,000 and interest, given by the petitioner, the other, ited to £2,000 and interest, given by the debtor jointly and severally with one Edmund Covell. Judge Lukin held that the petitioner's contract of guarantee, rhich document was not produced, made her responsible for the e principal debt as that for which the debtor and Covell became 'ible by virtue of a document dated May 3rd, 1926. The document was put in evidence. The validity of his conclusion ends upon whether the petitioner's contract with the bank sufficiently proved. What evidence was there of this ? _ The first piece of evidence relied on is that said to be contained the Court documents filed in certain proceedings in the Supreme ( of New South Wales in Equity, the parties to which were present petitioner and Harry Rickards' Tivoli Theatres Ltd. those proceedings the petitioner alleged the existence of a tract in writing, dated September 27th, 1929, and the fact that thereby became surety for all debts present and future, owing the defendant company to the National Bank of Australasia

[125]

Conveyancing Act 1919 could be given by the method prescribed in sec. 170 (1) (6) of that Act, for serving a notice which is required or authorized by the Act to be served. That question does not appear to have been raised at the hearing of the petition. Indeed, his Honor said in his judgment : - ' The existence of the second debt alleged is sufficient for the purpose of the petition. Its complete assignment is undisputed." But, in my view, it would not be necessary to express an opinion on that question, even if it could be properly raised in this appeal. I agree in the opinion of my brother Starke, in which he rejects the contention of the appellant that an equitable debt cannot sustain a petition in bankruptey. There is not, in my opinion, any expression of legislative intention in secs. 54 and 55, orin any part of the Act, which renders it necessary that the meaning of the word " creditor" should be restricted to creditor at law, and of the words "the debt owing by the debtor to him" and "the debt is a liquidated sum " should be restricted to a debt at law or a legal debt. Furthermore, if reference is made to sec. 57, I cannot see any indication that the Legislature intended that the word "debts" should not include equitable debts. The principles stated in the authorities cited by my brother Starke, and his review of the history of the legislation relating to the subject of bankruptcy, in my opinion fully support this view of the Act. In dealing with the debt of £99 2s. 2d. as a debt in equity, the question arises whether the sequestration order should be discharged, on the ground that the assignor or trustee was not a party to the petition. This ground of opposition to the making of a sequestration order on the petition was taken in the appellant's notice of intention to oppose the petition. However, it was not mentioned at the hearing. Probably it was not considered material, because the learned Judge said: "The complete assignment of the debt is undisputed." The notice of appeal does not specially take it as a ground of appeal. I do not think the sequestration order in this case should be discharged on account of the non-joinder of the assignor. In Ex parte Cooper; In re Baillie (1), it was held that in that case the assignee was entitled to present the petition alone. The report mentions that the assignor refused to join in the petition.

[126]

Tt has been decided that a mere trustee of a debt for an absolute owner, which is the converse of this case, is not entitled esent a bankruptcy petition against the debtor unless the que trust, if capable of dealing with the debt, joins as a titioner (Kx parte Culley; In re Adams (1); Ex parte Dearle; Hastings (2) ). The reason for that rule was stated by James in the former case, in these words (3) : - '' But there is nothing athe Judicature Act, or in sec. 6 of the Bankruptcy Act, to alter he old rule of law or practice of the Bankruptcy Court, that for the safety of mankind the beneficial owner must join in the requisite th, that the money is justly and truly due, that it has not been and that he has no security for it. It was considered not ent to have only the oath of a man to whom in fact not a was due, and who might know nothing at all about the y which the real owner had got.' Cotton L.J., speaking on same subject, said (4) : - '' But if it turned out that, although as entitled to the legal debt, that is, entitled at law, he was absolutely entitled to it by reason of there being a beneficial hip in some one else, and the beneficial owner was a person 10 had it in his power to deal as he thought fit with the debt, by releasing it or by receiving it, then the practice in bank- was that the beneficial owner must join in the petition with he legal creditor, for the purpose of satisfying the Court that the bt had not been released or paid." (See also In re Ellis ; Ex parte elwood (5); Ex parte Owen; In re Owen (6).) The source of @ above-mentioned rule was described by Vaughan Williams J. ve Maund ; Ex parte Maund (7). His Lordship said : - '* In cases, however, it will be seen that the person added was essential to the petition by virtue of the requirement of the it, but only by virtue of the rules of practice of the Bankruptey rt. That is the explanation of the addition of the cestui que st in Hx parte Dearle; In re Hastings. In Ex parte Owen: re Owen, the actual amendment was not made; it was only z that it might be made."

At a glance

Court

Decision date

Before

Source

Judgment (153 paragraphs)

Cited By (3)